USD/CAD – Little Change as Canadian Numbers Mixed

USD/CAD continues to trade in a narrow range in Tuesday trading. The pair was trading in the mid-1.00 range early in the North American session. On Monday, Canada released mix data, as Building Permits were excellent, while Ivey PMI was way below expectations. In the US, we can expect a quiet day, with just two minor releases on the schedule, as well as a speech from Treasury Secretary Jack Lew. There are no Canadian releases on Tuesday.

Canadian releases got off to a quick start on Monday, with the release of two key events. Canadian Building Permits posted its third consecutive gain, jumping from 1.7% to 8.6%. This blew away the estimate of a 0.7% rise. Ivey PMI failed to follow suit, as the index plunged from 61.6 points to 52.2 points. The key indicator was well off the estimate of 58.3 points. USD/CAD did not show much interest in the figures, as it trades quietly in the mid-1.00 range.

The markets continue to pay close attention to the ECB. After the ECB took action and reduced interest rates, the markets had a chance to hear ECB head Mario Draghi, who spoke in Rome on Monday. Draghi said that last week’s cut was taken due to the continuing slowdown in the Eurozone, and urged Eurozone countries to take the necessary steps to get their fiscal houses in order. Draghi repeated that the ECB was open to further rate cuts, as well as lowering its deposit rates below zero. When he mentioned the latter point last week, the euro took a dive, but this time, the markets did not react. However, not all policymakers favor further rate reductions. Yves Mersch, an ECB board member, stated that interest rate cuts have limits to their effectiveness.

Back in the US, last week’s employment numbers were welcome news, as the US has been churning out mostly weak key releases. Last week’s Unemployment Claims came in below expectations for the second straight week. The key indicator dropped from 339 thousand to 324 thousand, blowing past the estimate of 346 thousand. On Friday, Non-Farm Payrolls climbed to 165 thousand. This easily beat the estimate of 146 thousand. As well, the Unemployment Rate fell from 7.6% to 7.5%. Improving employment numbers are critical for economic growth, and the markets are hoping that the good news continues.

USD/CAD for Tuesday, May 7, 2013

1.0057 H: 1.0083 L: 1.0036

USD/CAD Technical

USD/CAD is showing little movement for the second straight day, as the proximate resistance and support levels (R1 and S1 above) remain in place. The pair continues to face resistance at the round number of 1.01. This is followed by stronger resistance at 1.0157. On the downside, there is weak support at 1.0041. This line could be tested if the Canadian dollar shows any improvement. The next support level is at the all-important parity level.

Current range: 1.0041 to 1.01

Further levels in both directions:

• Below: 1.0041, 1.00, 0.9930 and 98.42
• Above: 1.01, 1.0157, 1.0229, 1.0282 and 1.0361

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in Tuesday trading, continuing the pattern we saw on Monday. This is reflected in the pair, which is showing very little movement. Traders should continue to monitor the ratio, as an increase in activity could be an indication that we will see the pair breakout from its current drifting.

USD/CAD shrugged off some key Canadian numbers on Monday, and continues to drift in the mid-1.00 range. Will we see a push towards parity, or will the US dollar flex some muscle? We’re unlikely to see either scenario on Tuesday, with little happening in the way of fundamental releases. So traders can expect the pair’s drifting to continue. 

USD/CAD Fundamentals

• 14:00 US IBD/TIPP Economic Optimism. Estimate 47.1 points.
• 19:00 US Consumer Credit. Estimate 16.2B.
• 20:00 US Treasury Secretary Jack Lew Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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